Kapitaland Ltd entered into a contract to develop a small-scale condominium project for $60m in 20x1. The project's estimated completion is 20x4. The other data relating to the project are as follows: For the financial year ended 31 December 20x1 20x2 20x3 20x4 $'m $'m $'m $'m Costs incurred to-date 9 27.5 46.2 6.5 Estimated costs to complete 41 27.5 19.8 0 Billings to-date 8 20 45 60 Collections to-date 6 16 33 55 The company uses the input cost method to measure the percentage of complete satisfaction of the performance obligation. Required: (a) Examine the above information and prepare the necessary journal entries in the books of Kapitaland in accordance with FRS 115 Revenue from Contracts with Customers for the above project for the years ended 31 December 20x1, 20x2 and 20x3. Narrations are not required. (b) Present extracts of Kapitaland's financial statements to reflect the construction contract for the years ended 31 December 20x1, 20x2 and 20x3. Narrations are not required. Part II This part of the question should be answered independently of Part I Further details of the construction expenditures incurred by Kapitaland are as follows: For the financial year ended 31 December 20x1 20x2 20x3 ($'000) ($'000) ($'000) Administrative expenses 159 195 166 Depreciation of existing construction equipment 660 172 0 Direct labour 1,388 1,672 1,400 Direct materials 3,793 16,217 17,026 Purchase of new construction equipment on 1 July 20x1, 3,000 0 0 depreciable over 3 years on a straight-line basis Fine for improper waste disposal 0 244 0 Site clearance for final handover 0 0 108 Costs incurred during the year 9000 18500 18700 Required: (a) Apply FRS 115 Revenue from Contracts with Customers and compute the relevant contract costs for the financial years ended 31 December 20x1, 20x2 and 20x3 for the purpose of determining the percentage of completion of the contract. State which items of expenditure are to be excluded and explain why they are excluded. (b) Assume that all the relevant expenditures had been paid and fixed assets had been depreciated as at the financial year end, prepare the necessary journal entries to record the contract costs for the financial year ended 31 December 20x2.